Alveoli, the sites of gas-exchange in the lung, are formed to a substantial degree in all species studied, including rat and man, by the developmentally regulated subdivision (septation) of the large saccules that compose the gas-exchange region of the architecturally immature lung. Rat lungs septate from about the 4th to the 14th postnatal day. If the process is blocked during that period by treatment with dexamethasone (a glucocorticosteroid hormone), it does not occur subsequently resulting in rats that have fewer alveoli and a smaller gas-exchange surface area (Sa) than normal. Prematurely born infants who develop bronchopulmonary dysplasia (BPD) fail to septate and have fewer alveoli and a smaller gas- exchange surface area than premature infants without BPD. The cause of this failure to septate is unknown but glucocorticosteroid hormones may be involved because they impair septation in rats and monkeys, and are commonly used in the treatment of BPD. At the heart of this competitive renewal are two new discoveries of great clinical relevance to individuals with diseases characterized by having too few alveoli. We used state-of-the-art stereological procedures to measure the size of the lung's gas-exchange surface area (Sa), the volume of individual alveoli (v), and the number of alveoli (N). We discovered that treatment of newborn rats with retinoic acid prevents, by more than half, the dexamethasone induced 75% inhibition of the number of alveoli formed. And, perhaps more important, in otherwise untreated rats, retinoic acid causes a 50% increase in the number of alveoli without inducing an increase in lung volume. We propose to pursue these new findings in two ways: [l]Use morphometry, in situ hybridization, and immunolocalization, at the ultrastructural level, to define aspects of the cellular and molecular response of the alveolar wall to treatment of newborn rats with retinoic acid, dexamethasone, and a combination of these agents. [2]Further characterize the architectural response to treatment with retinoic acid making the same measurements (Sa, v, N) that allowed us to make the initial observations. We believe we can accomplish all the work proposed because [1]we have extensive experience in the stereology required to enumerate alveoli and particles, [2]we have all the reagents needed to perform the in situ hybridization and immunolocalization, [3]we have demonstrated we can perform immunolocalization at an ultrastructural level, and [4]we have worked out a method to perform in situ hybridization at the ultrastructural level.